Top Tip for Improving Business Productivity
By Dennis Keay
Why Increase Business Productivity?
Before pursuing an increase in productivity in a business, I like to confirm that that’s really the highest priority, and sometimes there’s reasons it’s not. A prime example of this is when you don’t have enough demand for your product or service. In other words, whey you have EXCESS capacity. Improving internal productivity in that situation will increase capacity further, but unless that’s actually reducing your net costs, then what’s the point of that (unless you’re doing it for a strategic reason such as preparing for an expected upsurge in demand).
You could look at reducing your internal costs by sacking some people and banking on productivity increases to cover any shortfall in labour, but that can damage your business rather than grow it. If people think their jobs are threatened then they may covertly resist productivity improvements, which is counter-productive. We’ve always got to be looking for honest WIN-WINS for the business and its employees. We really do need to treat people as the valuable assets they are. But I digress…
Top Tip to Improving Productivity
Assuming increasing productivity IS your highest priority, then I like to understand the overall situation and look at the process or system as a whole. You need to identify bottlenecks and the causes of lost productivity. That’s because you can, for example, increase production speed, but if quality suffers and you end up with increased costs due to rework and warranty, or if you end up with delayed losses such as plant and equipment breakdowns, then you can end up going backwards rather than forwards in terms of overall profitability.
Also, bottlenecks (constraints) often move, so you need to predict where they’re likely to move to. If you don’t do this you may make some form of investment and expect a significant increase in overall productivity, but you get it at only one specific point of the process. In other words you immediately push up against the next bottleneck that limits your overall productivity. I’ve seen this many times where a business may, for example, invest heavily in a CNC machine but barely get any more product out the door. (It’s wise to ‘spend the brain before spending the money’.)
Once I understand the overall situation, problems and opportunities, I then go into problem-solution mode to determine the best way to make meaningful improvements to the process as a whole. In one case set-up time reduction may be key, in another it might be quality improvements to get-it-right first time. In the case of low demand (an external bottleneck) our focus would be on increasing profitable sales.
The Top Tip is to deeply understand the situation before trying to apply productivity improvement ‘solutions’…otherwise you may be wasting valuable time and money.
If you’ve got any business improvement questions, feel free to ask. Others may be wondering the same thing. If we think the answers might help others, we’ll share our thoughts via a short article like this one.